Saturday, February 19, 2011

The House voted early Saturday to slash more than $60 billion from the federal budget over the next seven months, showing how powerfully the grass-roots, antispending fervor of the November elections is driving the new Republican majority’s efforts to shrink the size and scope of government.

What a joke! Sixty billion is nothing, chump change, basically meaningless. Here's a bunch of easy decisions to cut expenditures that were considered; the first one barely passed and the rest were rejected:

An amendment to reduce financing for the National Endowment for the Arts back to fiscal 2006 levels (about $21 million) passed in a tight vote.

Rejected the amendment that would have prohibited the Defense Department from sponsoring cars in Nascar races. "Incredibly, over the past decade hundreds of millions of taxpayer dollars have subsidized race car owners and millionaire drivers in the name of military recruitment," she said.

Rejected the amendment that would have prohibited financing of the war in Afghanistan to no more than $10 billion.

Rejected the amendment that would have eliminated $1.5 billion allocated for security forces in Iraq.

Rejected the amendment that would have eliminated the Selective Service System.

Rejected the amendment that would have eliminated $415 million in financing for the V-22 Osprey aircraft.

So, since Congress will never stop spending until the empire collapses, you think you should run out and short TLT or buy TBT, right?

Wrong. They still have aces up their sleeve. First, they can and will raise taxes and especially corporate taxes. That will savage corporate profits and lead to lower equity valuations. Second, the Treasury market still benefits from "flight to safety", so when the equity market collapses there will be a stampede into treasuries.

Noncompetitive retail investors *know*, even with the incredibly steep yield curve, that there's no value in long-term bonds. It is common knowledge. It is always better to chase things that pay no yield. ;)

For what it is worth, I participated in the 30-Year TIPS auction. I represented 1/584th of all noncompetitive retail investors. Talk about feeling lonely, not that I'm complaining!

"Protection against deflation is guaranteed by the government; protection against inflation is an intrinsic property of the item."

Sounds like the inflation protected I-Bonds I've been buying since 2000. I really backed up the truck on those.

1. Tax deferred up to 30 years2. Cannot deflate, even month over month3. Growth tied to the CPI-U4. Pay a fixed rate over inflation

#4 is a bit weak right now. The current 0.0% rate means the gravy train is gone. They also lowered the amount we can buy each year by 83% recently.

However, even 0.0% I-Bonds will perform at least as well as cash no matter what happens.

It is even possible that you could have real profits if we continually toggle between deflation and inflation. The bonds can't fall in nominal value during the deflation but they can gain in nominal value during the inflation.

It is even possible that you could have real profits if we continually toggle between deflation and inflation.

That would mean you were long inflation volatility. Sounds like a great bet! (As we oscillate between enough inflation to save the insolvent financial system and enough deflation to crush out of control commodities prices.)

Michael Lewis talked about this on the Colbert report a while back. It's "free", except for the facts that

1) It's very hard (though possible) to do on a large scale2) It's illegal to melt down US currency to use for its metal content3) You lose the opportunity cost of the money as it sits there4) Your time and energy to do this are worth zero5) Your risk of holding such currency are zero (being robbed/fire burning down the place)6) Your storage costs are zero (to avoid #5 by holding in a vault somewhere)

In Langone's world, apparently a person has two options for how they can spend their time:

1.) Pursue productive investment opportunities2.) Watch TV

Based off that premise, his response makes sense. Based off the premises of reality, whereby every individual is faced with a multitude of choices as far as how they spend their time, and CP has picked just one of those alternatives (TV watching) to criticize, Langone comes across like a bit of an enraged ape.

The problem related to TV watching isn't just that it's a "waste of time", it's WHO primarily wastes their time that way-- the hopelessly in over their head average American lard ass, with negative equity in their home, auto payment, just lost their job, 401k obliterated once and working on round 2, etc. Basically, all the whiny dupes from "Main Street" who think that since Wall Street got a bailout, it's only fair they get one, too.

But they can bail themselves out. And the first step would be to stop wasting time watching TV and feeling sorry for themselves.

TV is an interesting form of diversion because it's one of the few things you could spend 10,000 hours on which would yield no practical results and no development of new skills, ideas or personal improvement. Hell, as sex-addled as this country supposedly is, if people spent as much time having sex as they did watching TV they'd at least get better at it and enjoy the sustained euphoria and psychological benefits caused by the release of hormones, and maybe even burn a few calories!

Well we can all thank Taylor for once again proving the anonymous internet fuckwad theory is still alive and well - great diatribe about TV, really. It's much worse than watching movies, sports (in person), playing fantasy football, video games, going fishing, or the host of things people do for leisure outside of reading.

CP, this is such a great idea, I'm waiting for you go do it. Please let me know how it works out.

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